Monaco

ABOUT MONACO

Easily accessible, the Principality of Monaco offers an exceptional life-style at the heart of Europe and the next to Mediterranean sea. Among the many aspects which make Monaco a strategic location for doing business in Europe are its unique political and economic environment, the presence of efficient administrative infrastructures, the density of financial activities and the security for residents and their property. Moreover, the Principality of Monaco is an ideal living environment for highly qualified professionals, offering a pleasant and prestigious life-style , total security for themselves and their property, a socially and culturally diverse atmosphere, numerous education possibilities, for their children and technologically advanced health facilities.

Advantages of doing business in Monaco

Incorporating a General Business Corporation in Monaco( GBC) can be easy, it only requires:

Two shareholders of any nationality and residency who can be an individual or a body corporate

Two individual directors of any nationality and residency

A paid-up share capital of EUR 150 000

Monaco is a great place for high net worth individuals to live because:

Monaco residents do not have to pay any local personal income tax to the Monaco tax authorities. Except French citizens, as they have to pay French personal income tax.

You do not have to pay any inheritance or gift tax, excepted on local assets.

Most locals are also fluent in English, Italian, Russian and other main European languages, so it easy to find the same language.

Local residences are often luxurious, with great utilities and facilities, so Monaco real estate is a safe investment.

Monaco is with low criminality a safe place for families with kids

If you have a lease agreement for a residential address in Monaco, you do not have criminal record, you have sufficient income( at least €0,5 million per year in most cases) you can request a residency permit.

Forming a company in Monaco offers the following tax advantages:

Companies making over 75% of their sales within Monaco, are legally exempt from corporate income tax.

Companies subject to corporate income tax, still benefits from a two years tax holiday from the date of their formation in Monaco. Thereafter, these businesses benefits furthermore from reduced rates of: 8,5%(3rd year), 16,5% (”’4th) and 25%(5th year).

Although Monaco is not a member of the European Union, it is still part of the EU customs zone, so entrepreneurs exporting products and services to other EU countries will not be subject to custom duties.

Monaco implementsd no withholding taxes are foreign exchange controls and the country is part of the Eurozone.

Furthermore, Monaco is a regulated, stable jurisdiction within an established judiciary, giving international investors long-term security

Disadvantages of doing business in Monaco

A Monaco company is not an offshore company:

It is subject to corporate income tax 33% if its global sales exceed 25% of its total sales.

Monaco also requires companies registered in Monaco to apply value added tax on their local and French sales at the French rate of 20%

Starting a business in Monaco is time consuming and costly because:

Monaco company formation is expensive, due to a minimum paid-up capital of €150,000. The required amount is furthermore significantly higher in many industries, so it is important to carefully plan ahead the structuring of the company.

Monaco´s Government closely vets prospective investors and companies. Under the terms of its license, each company must abide by stringent operating restrictions, including: The company must carry out only the narrow band of activities, for which it is licensed and the company must have physical premises and staff in Monaco

Because of the complex and lengthy government approval procedures, Monaco company formation ca take up to six months. Companies being set up to conduct activities such as commercial banking, investment management, notary services, legal services, architects, certified public accountants and insurance companies are subject to additional approvals.

Tax Resident in Monaco

Tax Resident of Monaco is individual that has Monaco residency or Monaco is center of his business and personal interest.

Tax Resident of Monaco is individual that spends in Monaco above 183 days during calendar year

Tax Resident of Monaco personal income tax are 0%, except French nationals. French nationals have to pay taxes according to French law.

TAX RESIDENCY – BUSINESS:

enterprises, irrespective of their legal form, which carry on industrial or commercial activities in Monaco if at least 25% of their turnover results from
operations which are conducted directly or indirectly outside Monaco;

companies (sociétés) whose activity in Monaco consists of collecting the proceeds of: the sale or licensing of patent rights, trademarks,
manufacturing processes and formulas; or literary or artistic copyrights.

Taxation of dividends: The standard withholding tax rate on dividends in Monaco is 0%. However, a holding company owning more than 20% of the shares of a non-resident company will pay corporate tax dividens

Losses: Tax losses(including capital losses) may be carried forward up to 5 years. Carry back of losses is permitted in certain cases for up to 3 years.

Participation exemption: See Taxation of dividends

Taxable income:

0%/33%

Taxation of dividends:

0%

VAT registration:

All companies are required to register for VAT

– VAT Rates:

The standard rate of VAT is 20%.

Alternative minimum tax:

No

Withholding tax (general):

0%

Capital gains tax:

0%

Real property tax:

There are generally no property taxes in Monaco

Social security:

Social insurance contributions payable by employers and employees are high. The employer’s contribution is between 28%-40% (averaging 35%) of gross salary including benefits and the employee pays a further 10%-14% (averaging 13%).

Payroll tax:

0%

Stamp duty:

No

Capital duty:

No

Tax treaties:

More than 90 tax treaties are in force. Belgium signed the OECD multilateral instrument on 7 June 2017.

Anti-avoidance rules:

– Transfer pricing

Transactions between related parties (as defined) must be at arm’s length. The comparable uncontrolled price method may be used, but in the absence of any direct comparables, the taxpayer may use the cost-plus or the resale price method.

– Thin capitalization rule

There are no specific thin capitalization rules, but interest paid to a nonresident (whether or not related) must be on arm’s length terms.

– Disclosure requirements

No

Compliance for corporation:

Tax year: Calendar year.

Filling requirements: The tax return must be filed within three months after the year-end.

Rulings: No.

Tax authorities: The tax authorities are organized within the Ministry of Finance and the municipal level.

Personal Taxation in Monaco 2018

Personal taxation basis:

Residents individuals pay taxes 0%

Tax Residence:

An individual is resident if he/she is in Monaco for 183 days or more in a calendar year.

Social security payments in Monaco:

Social security contributions due by an employee are levied at a rate of 10%-14% (averaging 13%).

Inheritance/estate tax in Monaco:

Inheritance and gift taxes are only payable by residents on assets situated in Monaco and do not apply to assets located outside the jurisdiction. The rates of tax payable depend on how close the relationship is between the donor and the done with the general rule being that the more distant the relationship the higher the tax payable.

The rates payable on transfers of property situated in Monaco whether by way of inter vivos gift or on death are as follows:

Legal services in Monaco for all Novasigma Clients including companies and their owners and directors

Novasigma has built in Monaco team of lawyers, associates and legal advisers to assist our clients with a business and tax planning, overseas business operations, risk management and other legal matters. Primarily focused on business transactions, Novasigma Accounting & Law corporate attorneys are a great asset to a small and large businesses. With a background on corporate law, our corporate lawyers and legal advisers have an in depth knowledge on the transactions that may put your business at risk of litigation. These include contracts and negotiations, taxation laws, business structuring, buy/sell agreements, and intellectual property, among others.